3par: Preliminary Financial Results for 1Q2010

3PAR announced preliminary revenue and net loss per share results for the first quarter of fiscal year 2010, which ended June 30, 2009, and revised revenue and earnings guidance.

Based on unaudited preliminary results, the Company expects to report revenue for the first quarter in the range of $44.2 million to $44.5 million, representing an approximate 3 to 4% increase over the comparable prior year period and an approximate 8 to 9% sequential decrease over the fourth quarter of fiscal 2009. As compared to the Company’s earlier guidance of $48 million to $50 million, the preliminary revenue result is attributable to installation delays at customer sites which prevented the recognition of significant revenue from shipments out of the Company’s backlog, as well as a weaker demand environment experienced during the quarter. The revenue shortfall from installation delays was exacerbated by large order concentration in our shipments and backlog.

The Company also expects to report GAAP net loss per share in the range of $0.04 to $0.03 and non-GAAP net loss per share in the range of $0.01 to $0.00. As discussed below, the difference between our estimated GAAP net loss per share and non-GAAP net loss per share reflects non-cash stock compensation expense, which we currently estimate to be $0.03 in the aggregate. The company maintained relatively strong gross margin performance during the first fiscal quarter.

"While we are pleased to report an increase in year-over-year quarterly revenue, especially given the current economic environment, we obviously expected to perform better in the first quarter and are disappointed with the sequential decrease," said David Scott, President and Chief Executive Officer.

"During the June quarter we saw spending restrictions across many segments of our business as a result of the continuing economic downturn, reflected as a sluggishness to place new orders." Scott continued, "This phenomena increased in intensity towards the end of our first quarter, similar to the turbulence we experienced at the end of our fiscal 2009 third quarter, as there was a renewed reluctance amongst prospective and existing customers to commit to major capital expenditures."

As a result of the continuing weakness of the global economic situation and the relative weakening of the demand picture from a bookings perspective towards the end of the first quarter, the Company believes it is prudent to modify its full year revenue and earnings guidance. Accordingly, the Company is forecasting revenue for the full year of fiscal 2010 to be in the range of $190 million to $205 million. Assuming our gross margins remain in the range of recently experienced levels, for the full year of fiscal 2010, the Company expects non-GAAP earnings per share to be in the range of $0.00 to $0.10.

We are also introducing guidance for our September quarter. We expect revenue for the second quarter of fiscal 2010 to be in the range of $43 million to $47 million. We do not guide GAAP or non-GAAP EPS on a quarterly basis, however, we do not expect our expense levels to reduce between the first and second fiscal quarters.

In terms of our long-term operating model, in light of the continuing economic downturn, while we reaffirm our long-term operating margin target of 15 to 19%, we no longer believe that we will achieve the low end of this operating margin target by the end of fiscal year 2011, nor do we believe we will sustain a 40 to 45% CAGR between our IPO and that date as previously stated. Instead we believe we will achieve the low end of our operating margin target at a revenue run rate of approximately $100 million per quarter, when and if that occurs.

These unaudited preliminary revenue and earnings results are, in accordance with normal procedures, subject to further review and completion by the Company. The Company will report complete financial results for the first quarter of fiscal 2010 on August 3, 2009.